It’s no wonder there are so many disillusioned Republicans nowadays. Personal responsibility, accountability and not relying on government were once the benchmarks of being a Republican. The proposed Bush sub-prime plan continues the trend of eroding these principles.

To summarise the Bush administration plan, if you have an adjustable rate mortgage and cannot afford the new repayments in 2008, subject to certain requirements, you will get a five-year freeze on interest rates for borrowers current with their monthly payments.

Putting aside the fact this will create another administrative nightmare and that it potentially opens the door for litigation by those who have already defaulted, it strikes at the heart of what makes markets operate. It also feeds into the ongoing trend from American monetary policy where there is now an expectation that the Federal Reserve will bail out investors when things get tough.

If individuals decide to borrow too much money then that is their problem. It is not the role of government to save people from themselves. In fact, economic history has demonstrated that by saving people from themselves, you end up making the situation a lot worse for everyone else who has not over-extended and has managed to service their debt.

It also highlights the ongoing problem for governments globally in an era of increasing global financial market complexity and interconnectedness, which is reactive versus proactive policy making.

Interestingly for all this administrative and public policy headache, Barclays Bank estimates that of the 2.2 million sub prime adjustable rate mortgages that are expected to be reset through to the end of 2009, only 240,000 of those would be covered by the proposal.

If that is the case, then there seems to be little political benefit from such a move. It makes it even more problematic for those who must be wondering why would a Republican President with a Treasury Secretary who once ran Goldman Sachs be undertaking such a move, unless there is now a concern that a severe US recession is a possibility.